Angel Funding and Venture Capital
Angel Funding or Venture Capital, while these terms are often used interchangeably, there is a difference in the structure of each type of organization and their expectation of investment. Whether a firm is an angel investor or venture capitalist, they will typically exchange equity in your company for an investment that can help you build new markets and attract new clients to grow your business. Entrepreneurs should take the time to learn the differences and evaluate the best fit for their business financing.
Angel Investors (Angels) give wings to entrepreneurs. Angels provide seed money to business startups—to the tune of tens of thousands to a million dollars or more—in exchange for convertible debt or ownership equity. Some angel investors come together to form angel groups or angel networks to share research and pool investment dollars.
Venture capitalists (or VCs), on the other hand, usually make their capital investments later in the business cycle. VCs exchange their investment and their expertise for a significant portion of the company’s ownership and significant control over company decisions.
Do your homework!
Before you approach an angel investor, angel network, or VC firm, ask yourself and your partners these questions:
- Am I willing to give up some amount of ownership and control of my company?
- Can I demonstrate that my company is likely to realize significant revenues and earnings in the next 3-7 years?
- Can I demonstrate that my company will produce a significant return for investors?
- Am I willing to take the advice from investors and accept board of director decisions I may not always agree with?
- Do I have an exit plan for the company that may mean I’m not involved in 3-7 years?
You’ll need to follow those answers with a solid business plan and an executive summary that includes:
- Financial overview for at least three years out
- Sales and marketing plans
- Three-to-five year goals and your action steps to get there
- Exit strategy
Visit the Resource Navigator to find a provider who can help you make these connections.
West Virginia Jobs Investment Trust
The West Virginia Jobs Investment Trust (JIT) is a public venture capital fund created to develop, promote and expand West Virginia’s economy by making investment funds available to eligible businesses, thus stimulating economic growth in the state.
JIT invests in early stage, later stage and mature small companies who wish to expand. Opportunities to create a significant number of jobs while maintaining economic balance are favorably viewed. Economic diversification is a plus. In order to maintain its ability to assist others in the future, JIT makes investments that are expected to yield a financial return proportionate to the level of risk it assumes. JIT does not make grants or low interest loans.
JIT is typically a minority investor and is not involved in the day-to-day operations of the portfolio companies. It prefers to be an active partner with the management team, typically at the level of the Board of Directors. Specific ways in which JIT might provide assistance include:
- Developing corporate strategy
- Recruiting additional management personnel
- Arranging additional infusions of capital